Hot Icelandic Marriage

Icelandair has bought low-fare competitor WOW air paying €15.8 million in a deal aimed at bundling forces to better withstand growing international competition on routes linking Europe
with North America. Combined, they account for 3.8 percent of the transatlantic market.

Former rivals, now siblings

Following the announcement, both carriers emphasized they would continue to operate under their existing brands and pursue different business models. States Bogi Nils Bogason, Icelandair’s
Interim President and CEO: “WOW air has in recent years built a strong brand and enjoyed great success in the company’s markets to and from Iceland and across the Atlantic.” The manager went on
to say: “There are many opportunities for synergies with the two companies, but they will continue to operate under their own brands and operating approvals.”
Therefore, no visible changes for passengers and cargo clients, at least for the time being. While Icelandair remains being a full-service provider, offering guests free food and drinks on board
their 36 B767 and B757 jetliners, travelers sitting in one of the 19 Airbus aircraft operated by WOW are asked to pay for beverages and meals and have to forgo any inflight entertainment even on
long-haul sectors between Iceland and the U.S. Westcoast.

Small shipments prevail
Turning to cargo, there won’t be alterations either. “They are two different players, running their individual freight business,” states Michael Jaensch of WOW GSA Aerotrans. In the case of WOW,
it is mostly small packages, mail and express freight transported by them, with roughly 85 percent of the EU originating consignments staying in Iceland while the others are transited from
aircraft to aircraft at Keflavik (KEF), ending up in Canada or the USA.
All shipments have to comply hand loading conditions because of the short turnaround times of the WOW aircraft, performed within less than an hour. “For processing large or heavy items machines
are needed, costing too much time,” explains Mr. Jaensch. “WOW Cargo is a niche product that is tailored to their LCC operation and their fleet requirements.” This excludes transporting
voluminous or heavy consignments in the holds of the carrier’s fleet made up of A321s and A320s. Only exception is WOW’s cargo-friendly sub-fleet of two A330 long-haul aircraft serving
transatlantic routes linking Keflavik with destinations in the U.S. and Canada but also New Delhi in India.

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Cargo friendly fleet
In comparison, Icelandair is in the forefront when it comes to transporting air freight.
Firstly because of the carrier’s fleet of passenger B767s and B757s that offer ample lower deck capacity for accommodating shipments.
Secondly the turnaround times of their aircraft are much longer compared to WOW’s fleet given by higher passenger numbers and time-consuming luggage treatment. Hence, the comparably longer
parking phase of the aircraft enables handling agents to load even large or cumbersome cargo items into the holds of Icelandair’s Boeing fleet.

Mogensen speaks of a “new chapter” for WOW
From a cargo standpoint the interesting question is if the under one roof policy of the Icelandic carriers will leverage any synergies or if both contenders continue going their own way,
maintaining two individual freight units and cooperating with different GSAs in identical sub-markets.
Basically, their going-together shows that a full-service airline and a low-fare carrier can build a co-existing duo focusing on specific passenger segments fitting their individual product and
serving different routes, this way complementing each other and preventing cannibalization. Founder and CEO of WOW Skúli Mogensen is very confident that the Icelandic marriage will lead to
satisfying results and leave his company enough air to breathe. The manager commented: “a new chapter starts where WOW air gets an opportunity to grow and prosper with a strong backer like
Icelandair that will strengthen our company’s international competitiveness even further.”